Under § 285, a “court in exceptional cases may award reasonable attorney fees to the prevailing party.” The court may deem a case “exceptional when there has been some material inappropriate conduct related to the matter in litigation, such as . . . vexatious or unjustified litigation[.]” Brooks Furniture. Litigation is vexatious or unjustified “only if both (1) the litigation is brought in subjective bad faith, and (2) the litigation is objectively baseless.” Therefore, the patentee may only be liable for attorney fees when it is established by clear and convincing evidence that the patentee’s case does not have an objective foundation and that the patentee actually knows this.

The Federal Circuit established the subjective prong of the test in Brooks Furniture, while finding that the Dutailier’s lawsuit was not subjectively baseless. Dutailier accused Brooks Furniture of infringing a design patent for rocking chair trim, however Dutailier ultimately did not prevail at trial. The court noted that “[t]here is a presumption that the assertion of infringement is made in good faith,” therefore “the underlying improper conduct must be established by clear and convincing evidence.” Brooks Furniture asserted that Dutailier’s expert opinions on infringement were unreasonable. But the court held that Dutailier did not act in subjective bad faith because “[t]he substance and thoroughness of the legal opinions could support a reasonable belief that the patent was being infringed.”

In ILOR v. Google, the Federal Circuit established the standard for the objective prong of the test, while finding that iLOR’s lawsuit was not objectively baseless. iLOR asserted that Google Notebook violated a claim in iLOR’s patent for a “[m]ethod for adding a user selectable function to a hyperlink.” Google prevailed in the lawsuit because the trial court found that the claim limitation of “being displayable based on a location of a cursor in relation to a hyperlink” did not cover Google’s feature that “allowed the user to right-click on a hyperlink while the cursor was positioned over that hyperlink.” Furthermore, the specification and prosecution history distinguished the right-clicking on the link in Google Notes from iLOR’s claim requiring hovering over the link.

The Federal Circuit determined that the objectively reckless standard for enhanced damages under In re Seagate Technology, LLC applied to the objectively baseless prong of the two-part test for vexatious or unjustified litigation. In re Seagate Tech., LLC, 497 F.3d 1360 (2007). To establish objective recklessness under Seagate, one must show that a party “acted despite an objectively high likelihood that its actions constituted infringement of a valid patent,” but “[t]he state of mind of the accused infringer is not relevant to this objective inquiry.”

The court found that “iLOR could reasonably argue for the claim construction that it proposed,” therefore, their lawsuit was not “objectively baseless” or “frivolous.” The fact that iLOR was wrong about the claim construction and that it lost at trial did not warrant sanctions because its lawsuit was not objectively baseless.

Conclusion

The holdings in Brooks Furniture and iLOR establish high burdens of proof on a defendant to recover attorney fees from a plaintiff’s overzealous litigation. The defendant must meet three requirements. First, in the subjective prong of the test, the defendant must establish by clear and convincing evidence that plaintiff acted in “bad faith” because it did not have a “reasonable belief” that defendant was infringing the patent. This analysis may include subjective aspects of the litigation such as the opinions of counsel or other expert options that the plaintiff used. Second, in the objective prong of the test, the defendant must established by clear and convincing evidence that the lawsuit was “objectively reckless” or “frivolous.” This analysis could include objective aspects of the litigation, such as claim terms, specification and prosecution history. Third, after establishing the subjective and objective prongs, the court must choose to exercise its discretion to award attorney fees under § 285.